Buying a home entails a lot more than simply attending open houses, arranging private showings, and making bids. It also involves dealing with lenders, title insurers, appraisers, and other real estate professionals who have a huge role in handling sale agreements.
Real Estate agents work tirelessly to grow their vendor networks by nurturing relationships with reputable pros and firms who know how to conduct business correctly and efficiently. This saves you a bunch of time in two ways; first in finding a group of trustworthy pros and, secondly, in making sure everything runs smoothly the first time.
How much can I afford? This is a question that takes most people forever to answer. This might be because no one knows how much he can pay for a home- except you are purchasing it outright. This is however not common as the majority of Americans purchase their home on a mortgage. This question can be better answered by the lender or your mortgage provider as they are both in a better position to answer the question for you than you are to answer for yourself. To answer this question, you should take the following steps:
Before you begin your search for a home, meet with a lender to determine how much you can afford: Ask a mortgage provider or lender to determine how much loan they can fund you with. This will have a huge impact on the price of the home you should be on the lookout for. It’s crucial to look at only homes you can afford.
You have to feel you can successfully make the payment: Don’t commit to a mortgage payment you may have difficulty making even though the lender can approve you for that amount: Most Americans get it wrong on this aspect. The fact that you qualify for a $250,000 loan and your mortgage provider is willing to loan you the amount does not mean you should take it. Go for a loan you can feel comfortable repaying. Most lenders purposely loan people more than they can comfortably pay.
Items you’ll need for the lender to start the process: Before you obtain a loan, your lender would require information about your financial status. Items such as your last two years W-2s, last three months’ bank statements (and if applicable, the last quarterly statements of other asset accounts), and paystubs for the last 30 days will be required from you. Do ensure you have your financial information available to present yourself as creditworthy to a potential lender.
After getting the loan pre-approval the next step is finding a home. Sometimes people can get frustrated during this stage and decide to opt for the less strenuous task of renting an apartment. To avoid such occurrence, the following steps should be taken;
Narrow your search to a specific geographic area: When searching for a home, narrow your search to a specific geographic area such as a county or city. Searching too large of an area is too strenuous and unrewarding. The less the area you have to search, they better your search.
Narrow your search to a particular neighborhood; After getting a particular city or county, narrow your search to a particular neighborhood or school district. This would further help to reduce the areas you have to search to get your desired home. The fewer areas you have to search, the better success you’ll have.
Narrow your search to a particular style: After you have decided the neighborhood you want to have your home located, you should move on to the style of home you want. Different styles of homes exist that can be purchased so be a little bit more specific in the type of building you want.
The process of offer negotiation takes a great deal of skill and we’ll work closely with you to make the best possible offer so you win the home. Some of the things considered in making the best offer is the actual market value of the home, unique needs of the seller, the amount of your down payment, the type of financing you’re pre-approved for, how soon you can close et cetera.
EARNEST MONEY DEPOSIT. This is the amount of money you give with the offer and it is done to show you are serious about purchasing the home. The money is usually held with your real estate broker but sometimes with the seller’s broker or the title escrow company. This money is only at risk if you back out after all contingencies have been met which will be discussed in the next section. There is no required dollar amount for the deposit but it should be high enough to give the sellers confidence you are a serious and capable buyer. An amount of 3% is a strong amount.
CONTINGENCIES: Contingencies are included in real estate contracts and help protect you in the event you are unable to meet one of them. For example the mortgage contingency states if you get denied a mortgage determine the contract is void and your deposit is returned. The same thing with the home inspection contingency; if the results of the inspection are not acceptable to you then the contract is void and your deposit is returned. Contingencies allows for the transaction to proceed as long as some requirements are met. A satisfactory home inspection and mortgage approval would in most cases mean that the offer would proceed and be accepted. This also entails your lender determining if the value of the home is equal, more than or is equal to your offer to purchase the property.
After your offer is accepted, arrange to have a professional home inspection to locate any fault or damage that would demand extra money for renovation or repairs. This also helps ensure you are paying the right amount for the home and affords you the opportunity to renegotiate the price if you are not satisfied with the physical state of the property.
During the process of purchasing your home, try to stick to the following do’s and don’ts.
Do: Try to make all credit card, car, and mortgage payments as they have always been. The mortgage lender will pull a credit report prior to closing to assure your credit is still acceptable. Look for good homeowner insurance coverage at a good price; calling your auto-insurance carrier is a good start because of multiple policy discounts that may be available. Begin the arrangement for moving to your new home.
Don’t: Never use your credit card for the down payment; it will be rejected by the lender. Never make a transfer or deposit money to and from bank accounts without consulting your lender- remember it is his money you are using. Never lease or buy a new car or make any purchase requiring a huge amount of money with consulting your lender.
To assure a smooth closing follow the steps below:
1. At least one day before closing your lender should review the Closing Disclosure (CD) with you (if they don’t call you, call them). The CD tells you the amount of money you need to take to closing and delineates all the charges associated with the purchase of your home. The figures on the CD should be very close to the figures outlined in the original Loan Estimate (LE) you received from the lender after your offer was accepted by the seller.
2. The funds for closing should either be wired to the title & escrow company or be in the form of a certified check (Cashier’s Check) from your bank or credit union.
3. Be sure you take your driver’s license to the closing since the closing agent will require this to prove your identity. If you are married make sure your spouse brings his/her license as well, even if not on the loan with you.
4. Arrange to have the utilities changed into your name before closing. You can call a few days in advance and tell them the date you want the change to occur.
5. Contact your agent to see if the final water bill is being arranged by the seller.
Here are a few things to think about doing after closing on your new home.
1. Arrange to have the locks to the home
2. Be sure to go online or call of your creditors to update your address
3. Arrange with the post office to have your mail forwarded to your new address.
4. If a final water bill comes and it includes service prior to closing send to the escrow company if funds were held in escrow by the seller to have this paid.
Take the time to figure out what type of home you want to buy. From single-family and multi-family homes to condos and co-ops, there are many different options on the market and it’s important to choose the type that best fits your needs. Figuring out the town or neighborhood you want to live in is equally important. While a property might have all of the amenities you’re looking for, factors like crime rate and proximity to highways can impact the overall home-owning experience. A good idea is to list out and prioritize your needs (e.g. large backyard, great school system) before you begin your search. What type of home you choose will depend largely on those things you value most.
The rule of thumb is that you should never spend more than 30% of your monthly income on a mortgage payment. An alternate rule states that you can afford to buy a property that runs about two-and-a-half times your annual salary. For a more tailored look at what you can afford, use an online mortgage calculator to see what your monthly mortgage payment would be if you bought a home today.
A few months before you start searching for a home, review your credit history and make sure it is in good standing. Get copies of your credit report, ensure that it’s accurate, and fix any issues you discover. It’s likely that you’ll also want to get pre-approved for a home loan, which will put you in a better position to make a serious offer once you find the right property. Getting pre-approved for a home loan from a lender is based on your credit history, debt, and income.
Do your research! Your opening bid should be based on the sales trends of similar homes in the area. So before making your opening bid, get online and review the selling prices of comparable properties. If these properties sold for less than the current asking price of the home you’re looking at, you can feel comfortable make a bid that’s slightly lower than what the seller is asking.
Everything from where home values are rising most, to the best ice cream shops and concert venues– that’s the kind of intricate knowledge real estate agents have about the markets in which they work.
Sure, anyone can Google housing statistics and local Southfield community information, but agents are constantly in the know; they spend an enormous amount of effort on building and maintaining their networks. Agents work hard to provide buyers with every last detail they need to know about the market.
With a veteran real estate agent comes veteran sales techniques. Put your trust in an experienced buyer’s agent who has proven to negotiate prices and the best terms possible for past clients.
Real estate jargon is not something the average home buyer knows a great deal about. Then again, it’s not crucial, so long as you employ a real estate agent!
Agents are well-versed in the language you’ll find with home purchase agreements and other real estate documents. This means that you don’t have to study up on real estate terms just to have a successful home-buying experience.
Our network of agents are local real estate experts who have the knowledge and experience to accurately determine the market value of the home you choose to make an offer on. This is really important to so you don’t get stuck over paying for your home. Too many agents are only concerned about closing the sale and earning a commission. Our sole focus is on our relationship with you… and to give you the right information at the right time to help guide you in making the best decision possible.
Start the journey towards your Metropolitan Detroit dream home and reach out to a real estate professional for proper guidance!